US Auto Sales Plunge
US auto sales plunged 36 percent in December, figures released Monday show, with the industry's annual volume hitting a 16-year low.
Chrysler led the way with a sales slump of 53% in December, with Ford posting a decline of 32%, closely followed by GM at 31%.
But US manufacturers weren't the only one hit, Toyota, the world's largest automaker, posted a sales drop of 37%, followed by Honda at 35% and Nissan at 31%.
The figures come just a couple of weeks after GM and Chrysler secured a $17.4 billion bailout from the U.S. government.
But this isn't just a US problem, figures also released today show that sales in France declined 16%, and sales in Spain almost 50% last month.
This one is surely going to get far worse before it gets better. The question now seems to be what happens if & when the bailout money runs out, as it surely will before things turn around?
Bush May Tap USD700 Billion Bank Fund To Help Car Makers
President Bush said he is prepared to tap the $700 billion bank-rescue fund to prevent an auto-industry collapse.
"If there were finance companies that were too big to fail, there are certainly automobile companies that are," said one analyst.
Oil climbed more than $3 from Friday’s intra-day lows as the Bush administration’s apparent willingness to give short-term help to General Motors and Chrysler eased speculation that the companies will collapse.
"Under normal economic conditions we would prefer that markets determine the ultimate fate of private firms," Dana Perino, President George W. Bush's spokeswoman.
"However, given the current weakened state of the U.S. economy, we will consider other options if necessary - including use of the TARP program - to prevent a collapse of troubled automakers."
"Because Congress failed to act, we will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry," said a Treasury spokeswoman, Brookly McLaughlin.
House Approves US Auto Bailout, But There's No Sign Of The Fat Lady Yet
The US House of Representatives last night approved a $14bn (£9.4bn) bail-out of the US car industry. (Wasn't it $15bn yesterday??)
The House approved the rescue plan by 237 to 170, mostly along party lines.
However, the bill must now go before the Senate Republicans, where the Democrats have a razor-thin majority, who have the power to kill it stone dead.
A number of high-profile Senate Republicans have already said they had every intention of scuttling a taxpayer-financed rescue for General Motors and Chrysler.
This initial rescue package is simply seen by them as the first installment of throwing good money after bad.
General Motors and Chrysler say they risk ruin without immediate aid. Ford says it may need funds in the not too distant future.
Under the terms of the proposed package the "Big Three" have until 31 March to submit plans to the "car tsar" detailing how they intend to restructure to ensure their longer-term survival. By that time of course the money will have already been spent.
It all seems like a very strange "deal" to me, and not one that any sound and rational businessman or financial institution would want to enter into.
Try ringing your bank this morning, tell them that your business is in danger of immediate collapse. Ask for a large sum of cash upfront today, and tell them you are about to start writing a business plan detailing how you are going to turn things around. You can let them have a copy by, oh say the end of March.
Carmageddon?
The US House of Representatives could vote on a $15bn bailout of the US car industry as soon as today, according to media reports.
The $15 billion package being proposed is substantially less than the revised $34 billion that was requested for last week.
General Motors and Chrysler say they risk ruin without immediate aid. Ford says it can wait awhile, but it too will need aid before too long.
All three are quick to point out that letting them simply go to the wall would result in up to 3 million more Americans on the dole. Certainly all three also appear to have been genuinely shocked by the lack of sympathy from Congress for their plight.
Many in Congress are acutely aware that bailing out the Big Three means stepping over the line that has been drawn in the sand between financial institutions and the rest of commerce. If they step over the line then what happens next?
Only a week ago the Big Three revised their needs from $25 billion to $34 billion. That beggars a few big questions: a) are things so bad that what would have sufficed a week ago, now needs $9 billion more to save it this week? b) if so, how do we know that you won't need another $9 billion next week? c) if you do need $34 billion then surely $15 billion is simply delaying the inevitable? d) what is the criteria now exactly for qualifying for a government bailout? Can any large mismanged conglomerate have one?
US Auto Makers Up The Ante
The so-called Big Three US auto-makers GM, Ford and Chrysler asked the US government for a $25 billion bail-out to stay afloat a fortnight ago. They met with a muted response, and were told to go away & come back this week with a concrete plan to prove that this wasn't going to be yet more money down the drain.
This week they are back. GM says it needs $18 billion, Ford $9 billion and Chrysler, the smallest, $7 billion.
Are we keeping up here 18+9+7=34. Yes, in the last fortnight things have got so bad that an extra $9 billion is now required to keep the big three afloat. Congress surely has to be asking what's changed in the last fourteen days? How do we know that you won't need another $9 billion in another couple of week's time?
After getting slated for flying in three separate corporate jets to last month's meeting, all the CEO's have adopted a more modest mode of transport this week.
GM's Wagoner is scheduled to drive to Washington in a Chevrolet Malibu hybrid vehicle. Ford's Mulally in a Ford Escape hybrid and Chrysler's Nardelli was set to leave drive in one of Chrysler's hybrid SUV's.
All three are offering a wide range of swingeing cuts, from two of them taking $1 salaries, to freezing exec bonuses, reducing white-collar staff, selling off brands and promising to get back into profitability by 2011.
There is only a narrow window for Congress to settle on any aid package for the automakers. If a deal cannot be sealed by next Friday, then they have little choice but to wait until after the new Congress is sworn in.
For GM in particular that may be too late.
Footnote: The US auto industry as a whole Tuesday reported a seasonally adjusted annual rate of sales of 10.18 million cars and trucks, the lowest level since October 1982, according to Autodata.
Ford CEO Says He Will Work For A Dollar To Get Govt Money
The Big Three US car makers face Congress later this week in a desperate effort to secure government money to help them stay afloat.
All three came in for heavy criticism last month, appearing genuinely shocked that the bailout wouldn't be a formality.
The irony that all three had flown to Washington in separate corporate jets to beg for money seemed lost on them.
At that meeting all three were quizzed on their willingness to work for a symbolic one dollar salary, as the head of Chrysler famously did in the 1980's in exchange for financial assistance from the US government.
"I think I'm OK where I am," was the cagey answer of Ford CEO Alan Mulally.
He subsequently seems to have realised the severity of the situation and had a rethink, now saying that he too would join Robert Nardelli, COE of Chrysler, on the lofty sum of $1/year. There is no word at the moment if Rick Wagoner of GM is also wiling to capitulate in the name of the cause.
Mulally has even gone a step further, saying that Ford will cancel it's management bonuses and sell all five of it's corporate jets in exchange for a $9 billion credit line.
Squirm.
US Auto Makers Submit Plan To Congress
One of these each do?
GM Shares Hit Lowest Since 1938
Shares in troubled automaker General Motors hit their lowest level since the Great Depression Thursday (in a nice twist of irony given all the comparisons being thrown around in the media).
Shares fell 38% hitting $1.70 on fading hopes of a pre-Christmas bailout. That marked the company's lowest share price since June 4, 1938, when they fell to $1.69.
Shares in Ford also took a big hit, falling as low as $1.01, matching a low last set on Aug. 19, 1982.
The Cheeky B@stards #2
To show his commitment to the cause, the head of Chrysler famously slashed his pay to $1 in the 1980's in exchange for financial assistance from the US government.
To his credit, earlier in the week, Robert Nardelli COE of Chrysler this time round, said he would do the same again.
At a tense meeting on Capitol Hill yesterday the CEO's of GM and Ford were repeatedly asked if they would be prepared to make the same symbolic gesture, as they desperately hold out their hands for $25 billion.
Only fair, methinks, the buck ultimately stops with them, and they've dug themselves into the crock of smelly stuff that they presently find themselves in.
They don't want the cash for themselves you understand, its for the people, the economy, their employees and their families. The very lifeblood of America is at stake here, stand up and sing your hearts out for our brave boys in Afghanistan, we the proud people of America are the greatest country on earth. It's about freedom, democracy, for every man, woman and child, whatever their race. For the one-legged five year old Mexican orphan living in a sewer and begging on the streets of San Fransisco who hasn't eaten for a week. JUST GIVE US THE F***ING MONEY!!
So, I'll ask you again, would you work for a $1 salary to show the people your commitment & belief?
"I'm willing to do what I've been doing," said Rick Wagoner of GM.
"I understand your point about the symbol. But I think, not just for me, but we're trying to fill a skilled and motivated team," fudged Alan Mulally of Ford.
Just answer the f***ing question Mulally.
"I think I'm OK where I am."
Next...
GM, Ford And Chrysler Heading For Massive Car Crash
The heads of the Big Three automakers of Detroit pleaded on Tuesday for emergency government aid to stave off potential collapse, but largely it appears met with stoney resistance and little sympathy.
Senate Democratic leaders said they had not been able to muster the support for legislation that would provide $25 billion to the troubled auto industry from the Treasury Department's $700 billion economic rescue fund.
The executives from General Motors, Ford Motor and Chrysler seemed stunned by the general lack of confidence that lawmakers showed in their companies.
"We have little evidence that $25 billion will do anything to promote long-term success," said Senator Michael Enzi, Republican of Wyoming.
The chief executives of GM and Chrysler said their companies were using up their cash at a rate that could leave them close to insolvency by the end of the year.
GM's chairman, Rick Wagoner, said: "the societal costs (of a Big Three failure) would be catastrophic — three million jobs lost within the first year, U.S. personal income reduced by $150 billion and a government tax loss of more than $156 billion over three years."
Despite the urgent tone of the executives, lawmakers in both parties saw little chance that a bailout could be put together and passed during the current lame-duck session. The Bush administration has steadfastly refused requests by Democratic leaders to tap into the financial rescue program to aid the automakers.
This has the look of an express train out of control to me, I think the speed of the demise of the Big Three from here on in will shock the world.
US: GM And Ford Hemorrhaging Money
Reports released Friday indicate that US motor giants General Motors and Ford are hemorrhaging money at an alarming rate, as they become two of the companies hardest hit as the world's largest economy goes down the toilet.
GM reported a larger-than-expected loss of $4.2 billion in the third quarter on Friday. The company's revenue in the third quarter fell 13 percent, to $37.9 billion from $43.7 billion a year ago, because of weak demand in its core North American and European markets, it said.
The company also reported that it burned through $6.9 billion in cash during the quarter and ended the period with just $16.2 billion in cash reserves. That leaves the company just enough to see it through to the new year.
The motor giant admitted it "will fall significantly short" of the cash needed to run its business in the first half of 2009 unless economic conditions improve and the company gets aid from the federal government.
Earlier Friday, Ford Motors said it burned through $7.7 billion in cash in the third quarter, leaving it with $18.9 billion at the end of September. It reported a loss of $2.9 billion in the third quarter.
The CEO's of Ford, GM and Chrysler met with government representatives last week to discuss an emergency loan package, believed to be as much as $25 billion, to help the companies get through the worst vehicle market in 15 years and avoid going into bankruptcy protection.
US car makers- the Big Three to become the "Not-So-Big-Two?"
(The Economist) -- THIS week shares in General Motors (GM), America’s biggest carmaker, fell below $10, valuing the giant firm at little more than $5.6 billion. The last time GM’s share price was this low, the Cadillac Eldorado had yet to grow fins and Volkswagen’s Beetle was a funny-looking novelty on American roads. That was in 1954.
Things are just as gloomy elsewhere in Detroit. Ford has abandoned all hope of returning to profit, as promised, in 2009 and appears to be bracing itself for a loss in 2008 even bigger than last year’s $2.7 billion. And on June 26th Chrysler was led to deny rumours that it was preparing to file for bankruptcy, after drawing down a $2 billion credit line from its owners, Cerberus Capital Management, a private-equity firm (see article), and Daimler.
It was not meant to be like this. At the beginning of the year both Ford and GM were expecting the credit crisis to knock sales in the first half, but they were still cautiously optimistic that they would soon reap the rewards of their expensive and painful turnarounds. Along with Chrysler, they had just secured a big package of concessions from the carworkers’ union that went a long way to closing the cost gap with the “transplants”—the lean, non-union factories operated in North America by their Asian and European rivals.
Independent reports by J.D. Power and Harbour showed that Detroit was also fast catching up with the Japanese on quality and productivity. GM’s new Chevrolet Malibu, declared North American Car of the Year in January, was seen as the first domestic product in years to give Toyota and Honda a run for their money in the fierce market for mid-size saloons.
But the carmakers have been ambushed by the disastrous housing market and, above all, by the soaring cost of fuel. Falling house prices have persuaded many people to put off buying a new car, and petrol at over $4 a gallon is radically changing demand. Detroit is still stuck with model ranges heavily biased towards the big, thirsty sport-utility vehicles (SUVs) and pickup trucks that raked in the profits when petrol cost half of today’s price.
The Big Three were certain that America’s love affair with go-anywhere, do-anything, gas-guzzling trucks would never end—so much so that both Ford and Chrysler pinned their hopes of recovery on new versions of their bestselling pickups, the F-150 and Dodge Ram respectively.
But that conviction has lately been shattered. Figures released this week show that sales of cars and light trucks in America in June fell by 18% compared with the same period a year earlier. Chrysler’s sales were down by a stunning 36%, pushing its market share below 10% for the first time in decades. Ford dropped by 28%. Despite flinging costly rebates at the market, GM’s sales were still down by 18%. Even Toyota, which was widely expected to overtake GM for the first time last month, took a 21% hit, as it struggled both to sell its big Tundra pickup and to keep up with demand for its popular fuel-sipping hybrids. Honda, by contrast, which unlike Toyota and Nissan has never offered Americans chunky pickup trucks, actually increased its sales by 1.1% thanks to a 26% rise in sales of its economical passenger cars.
Unless there is sudden reversal in the price of oil, Japanese and South Korean brands will make big gains in market share both this year and next. Their North American factories are more flexible than Detroit’s are and there is capacity to be tapped back home. Although GM and Ford make some fuel-efficient cars, such as the Chevrolet Cobalt and the Ford Focus, dealers complain that supply is limited and that customers tend to opt for Japanese or South Korean brands when trading down.
GM, Ford and Chrysler are each reacting to the crisis in different ways, but with the same aims—to reduce the speed at which they are burning cash, and to accelerate the arrival of more fuel-efficient models. Ford is slashing its salaried workforce, delaying the launch of the new F-150 by two months because dealers cannot shift the outgoing model, and converting an F-series plant in Mexico to build the relatively tiny new Fiesta, which Europeans will get this summer—more than a year before American buyers.
GM has gone further, closing four truck and SUV factories and putting its Hummer brand up for sale. Analysts reckon GM’s $20 billion cash pile is being depleted at a rate of $1 billion a month, making it a near-certainty that it will have to tap shareholders for new funds before long. And this week Chrysler said it would slash production of the Dodge Ram and shut one of its two North American minivan factories. Chrysler’s minivans have long been regarded as the firm’s “crown jewels”, but sales this year have suddenly slowed.
So just how bad are things for the Big Three? Their survival has been in doubt before. But two things are different this time. The first is that the carmakers’ finance arms used to bring in cash even in hard times. That is not happening now. More buyers are defaulting on their car loans, and the resale value of SUVs and pickups has collapsed so catastrophically that the finance offshoots are losing huge sums on vehicles returned after lease.
The second change is that it seems increasingly unlikely that consumers will eventually shrug off the high price of fuel and return to their old buying habits, which means that Detroit’s old business model is now obsolete. Jim Farley, Ford’s head of global marketing, describes the market as crossing a “watershed”. The problem is that the smaller, more efficient cars that buyers now want, and which will come on stream in a year or two, are far less profitable for both manufacturers and dealers. Denny Fitzpatrick, a GM dealer in California, observes that he makes more money selling ten Chevy Tahoes (a bloated SUV made by GM) than he does selling 50 Honda Civics (a compact car).
GM and Ford can at least take some comfort from their well-run foreign operations, which are benefiting from growing demand in China, Russia and Brazil. But Chrysler has no such cushion. Worse, it is planning to replace only half its fleet in the four years after the 2009 model year (compared with Honda’s 72% replacement and Nissan’s 80%). John Murphy of Merrill Lynch believes this is “an active decision by the new owners to rationalise the product portfolio in advance of a break-up or sale”. It may not be long before the Big Three become the Not-So-Big Two
